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Winning the Venture Game (2025 Edition)

In speaking to founders and investors recently here’s what I’ve learned about today’s environment:

  • Worst time for startups fundraising since 2001 (when Web 1.0 bubble burst)

  • Tons of incredibly talented people are out of work from the tech layoffs

  • Worst time in history for VCs fundraising from LPs

  • Prediction from a VC insider: 30%+ of VC firms will fail in next few years

The Opportunity for Founders

While it's the worst time to start a company that requires outside capital, if you have a way to bootstrap and get to cashflow positive (CFP) with your own savings and friends and family money, this is perhaps the best time.

With automation, and an overbuilt ecosystem, the cost to start something is approaching zero (other than sustaining the founders).

Artificial Intelligence is now a not-so-secret weapon giving everyone the potential to 5x or more their personal productivity. Not many people have figured out how to leverage it properly though. This is a huge competitive advantage if you can leverage AI.

The dire fundraising environment means you also won't have much competition from other startups addressing the same or similar problem or market opportunity.

So the strategy is to figure out how to give yourself a year’s runway and bootstrap until you get to CFP.

Once you are CFP, you don’t need outside angel or VC investors (and that’s when you will attract them, incidentally).

Or just organically grow without investors, which is the ideal way to build your business.

And/or do an equity crowdfund campaign, marketing to your existing customer/user community. This has the virtuous cycle benefit of marketing your product and attracting investors at the same time. At Crowdfunder we helped founders do hybrid equity/rewards campaigns where investors would get your product or services in addition to equity.

Because of the tech layoffs, you can bring on highly talented people for equity who have personal runway and want to give it a go.

Even though it's a "nuclear winter" for fundraising, remember two things: (1) eventually the tide will shift and you will be positioned to capture some of it for growth; (2) great founders with the right ideas at the right time will always be able to fundraise; it’s a matter of developing personal relationships with individuals who are aligned with your vision and trust you have what it takes to figure out how to make a valuable business out of it.

The Opportunity for Investors

If you think about the flip side of the founder puzzle above, you can see that now is a great time to: (a) get the best valuations for companies you do invest in; (b) look for special opportunities that are a result of these turbulent times.

Getting in at the right price is important for investors who have a large portfolio, as your returns are averaged. Paying too much consistently can turn an otherwise profitable portfolio into a loser.

For unicorn seekers, price doesn’t matter but investing at the earliest stage -- where your upside is greatest -- does matter. Had you invested in Facebook in 2010, you’d have gotten a 4x return at the IPO in 2012. But if you’d invested at the seed stage in 2005, you’d have gotten a 1,000x return.

The strategies for today’s environment are as follows.

Look for pre-VC companies with revenues that are operating capital efficiently. Help the founders shape the round specifically to get them to profitability. It’s a buyer’s market, so make sure you get a good price.

Invest in VC-backed companies with strong revenues but are out of runway to get to the next funding round, and are struggling to find a lead. Lead a down round and assume they are now off the VC path; your goal is to make sure they have enough cash and the strategy to get to CFP and grow organically from there.

If it’s strategically better to not have a down round, you can effectively get the right price with by layering on out-of-the-money warrants aligned with revenue or profitability targets.

Then there’s the liquidity/exit question.

Since you are in a position to shape and lead deals, you are no longer a captive of the "unicorn factory" model that requires each funding round to lead into the next. You should be investing in companies who have the mindset that success is being a profitable, growing business. Now that the valuation bubble has popped, people won’t look at you like an alien for believing this should be the ultimate goal of a business.

Talk to the founders about putting in terms that allow investors to get liquidity without an exit. Think dividends, share buyback, and rights to resell your shares to outside parties without hassle. Normally VCs and PE firms put such terms in as "downside" protections for themselves. I'm talking here of crafting terms with the founders that make it easy for you to get liquid on the upside, if and when the company is doing well and flush with cash. It's a potential win for both parties if you take a haircut on valuation in exchange for liquidity and reducing your forward-looking risk.


If you are looking to build a robust, antifragile portfolio there are only two ways to win, neither of which is practiced by most VC firms:

  1. Moneyball” approach - invest in hundreds of deals per fund/vintage

  2. Barbell” approach - 90% in cash; 10% in unicorn picks and distressed/special situations like those above.

If you are deep-pocketed, be on the lookout for good prices on secondary liquidity, LP positions and even entire companies.

I believe there's a huge opportunity right now for family offices and smaller PE shops to do founder-friendly rollups. Think Berkshire Hathaway for tech startups and social enterprises.


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